May 15 (Bloomberg) -- Japanese lawmakers supporting a bill
to legalize casinos said it would be tough to pass the law by
next month, a sign that the opportunity to link approval with
the 2020 Olympics in Tokyo is diminishing.

“Passing the casino bill in the current session of
parliament will be tough,” Sakihito Ozawa, a lower house
member, said today at a forum in Tokyo. Japan’s parliament, or
Diet, meets until June 22 and the bill must be sent to the upper
house at least 20 days before the session ends, he said.

The country’s ruling party and business leaders including
Lawson Inc. Chairman Takeshi Niinami have promoted casinos as a
tourism-boosting complement to the 2020 Summer Games in Tokyo.
The current Diet session offers the last chance for passage of a
casino bill in time to have gambling resorts open by then.

“We are doing our utmost to start deliberations on the
bill this month,” Takeshi Iwaya, secretary general of the pro-casino group of lawmakers, said today at the Japan Gaming
Congress in Tokyo.

Iwaya is in Tokyo with executives from global casino resort
operators including Las Vegas Sands Corp., MGM Resorts
International and Melco Crown Entertainment Ltd., who are
supporting passage of the bill to end Japan’s ban on casinos.

“Time is of the essence,” James Murren, MGM chief
executive officer, said yesterday in an interview. “There seems
to be a very strong political will to move this forward and who
knows what that environment will be a year or two from now.”

Tracking Macau

For MGM, Japan’s casino market could be bigger than that of
Macau, the world’s biggest gambling hub, Murren said.

The MGM chief and billionaires including Sands Chairman
Sheldon Adelson and Melco Crown co-Chairmen Lawrence Ho and
James Packer have said they’re prepared to spend billions on
gambling resorts in Japan. The country’s casino market could be
worth as much as $40 billion a year as early as 2025, making it
Asia’s largest after Macau, according to CLSA Ltd. estimates.

Officials in Prime Minister Shinzo Abe’s party have said
casinos can add hotels and provide an economic boost as the
country draws tourists to its capital for the Olympics. Abe is
looking for ways to broaden an economic recovery that’s
stalling, adding to pressure to end the ban on casinos in this
session of parliament to maximize the tourist boost.

“The powers-that-be in Japan have decided that the one-two
punch of the Olympics and the opening of integrated resorts in
2020 would provide a boost to the country’s profile and we would
agree,” said Grant Govertsen, an analyst at investment bank
Union Gaming Group. “If, for whatever reason, the first gaming
bill is not passed in 2014, we believe it will be exceedingly
unlikely that the first integrated resort could open prior to
2020.”

Betting Big

Adelson, the world’s 13th wealthiest person, said earlier
this year he was prepared to spend “whatever it takes” to
build a casino resort in Japan. That could come to $10 billion,
he said at the time. Murren also said he’d spend as much as
that, should legalization succeed.

Ho and Packer, whose venture operates casinos in Macau,
have indicated they are ready to spend at least $5 billion on
resorts and are looking to form alliances with real estate
developers and trading houses in Japan.

“These type of developments would generate millions of
incremental tourists and a tremendous amount of jobs and
economic benefits for the country, and of course for the host
communities,” Murren of MGM said. “The longer the delay, the
more the missed opportunities.”

Junket Question

Macau, home to China’s only legal casinos, has boomed by
attracting high rollers from the mainland and offering ways to
skirt limits on taking money out of the world’s second-largest
economy. Gambling industry revenue in the former Portuguese
enclave jumped 19 percent last year to $45.2 billion, about
seven times that of the Las Vegas Strip.

Murren said Japan’s market could be bigger for MGM because
there would be fewer operators competing.

“MGM is one of six concessionaires in Macau,” Murren
said. “In Japan, the market has potential of being $20 to $40
billion and there would be far fewer integrated resorts than in
Macau.”

Japan’s ruling Liberal Democratic Party has yet to win full
support for the bill from its coalition partner the New Komeito
Party.

“New Komeito has not traditionally been keen on gambling
legislation, so it may be a little difficult to get their
support as a whole party,” Iwaya said on the sidelines of the
Congress. “I’m seeking support from individual members of the
party.”

Gambling Opponents

The legislation, introduced in December, isn’t likely to
pass in the current Diet session, the Nikkei newspaper reported
April 28, without saying where it got the information. New
Komeito draws support from the Soka Gakkai sect of Buddhism,
which has expressed concern casinos would “worsen public
safety,” according to the Nikkei.

Once the current Diet session ends, lawmakers typically
come back for an extraordinary session starting in Japan’s
autumn, which means the casino bill could have an additional
chance to pass before the end of the year.

Gambling resorts would help the government reach its goal
of attracting 30 million foreign visitors a year by 2030,
Hiroshi Mizohata, former head of the Japan Tourism Agency, has
said. That number is triple the 2013 level, which was a record
high, according to the Japan National Tourism Organization.

Tourism Bet

Casino supporters have said the resorts would attract
wealthy tourists from China and around the world, along with
Japanese gamblers.

The current casino bill asks the government to create a
legal framework for casinos within one year of the law’s
enforcement. A subsequent bill detailing rules for casino
operations would also need to be approved.

Politicians including former Tokyo Governor Shintaro
Ishihara have failed for more than a decade to legalize casinos
amid opposition from groups concerned that the gambling
complexes would promote money laundering, gambling addiction and
organized crime.

Pro-casino groups’ current emphasis on the potential for
boosting tourism follows the success of Singapore, which opened
its first legal gambling complexes in 2010, in drawing visitors
from outside the country. Integrated resorts, or IRs, combine
casinos with luxury hotels, entertainment venues and shopping to
broaden the appeal and supplement revenue from gaming.

Singapore Model

Tourist arrivals in Singapore jumped 40 percent in the four
years after the two resorts opened in the city state. The two
resorts raked in $6.3 billion in revenue last year and
accounting for 2 percent of Singapore’s GDP, according to CLSA.
After opening four years ago, Singapore’s two casinos are
already generating almost as much as the Las Vegas Strip, which
tallied $6.5 billion last year.

Visitor arrivals in Singapore are expected to grow as much
as 8 percent this year from 2013 to a record 16.8 million.
Related revenue may climb by as much as 5 percent to S$24.6
billion ($19.7 billion), the Singapore Tourism Board forecasts.

Lawmakers will consider in the second phase of legislation
whether to emulate the Singapore model, which includes charging
entry fees to local residence to curb gambling addiction risks.

Middlemen

Japan’s pursuit of casinos also follows the booming success
of Macau as a gambling hub. One key to that growth is the use of
the so-called “junkets,” or the middlemen that lend money to
high rollers in China, enabling them to skirt limits on taking
money out of the country.

High-stakes gamblers contributed about two-thirds of
Macau’s $45 billion casino revenue last year. The more than 200
licensed junket operators in Macau generated more than 90
percent of high-roller, or VIP, revenue last year, according to
Praveen Choudhary, a Hong Kong-based analyst at Morgan Stanley.

Japanese officials have signaled concern that junkets
provide openings for possible criminal activities, Choudhary
said. This may discourage emulation of the Macau model in Japan,
he said.

“If Japan, like Singapore, does not allow junkets to
operate in the casinos, we expect the market size to be
significantly lower than consensus estimates of between $20
billion to $40 billion,” Choudhary said. “Gaming companies
might also face significant bad debt provisions” because
junkets handle debt-collection from high rollers who borrow to
play, he said.

The battle to legalize casino resorts could continue should
the bill fail to pass in the current parliament session, Aaron
Fischer, head of consumer and gaming research at CLSA, said by
phone.

“We don’t see 2020 Olympics as a deadline for Japan having
integrated resorts per se,” he said by phone.